India launches cap and trade

Unlike Europe’s ETS India’s Perform, Achieve and Trade scheme will set targets for individual plants, not across sectors. It is therefore very difficult to predict the impact that it will have. Targets could be too easily-achieved to have a significant effect on energy-saving investments. So far even those directly involved in the scheme have been unwilling to make firm predictions. However, with the mechanism in place the impact of the scheme could be increased. New targets are due to be set every three years.

SBB 1 April India launches an energy-efficiency cap and trade scheme today, which could affect around 100 steel and sponge iron producers across the country, Steel Business Briefing learns. The scheme hopes to achieve fuel savings equivalent to 23 million tonnes of oil and reduce CO2 emissions by as much as 98m t by April 2014.

The eventual impact of the scheme on the steel industry is unpredictable, as targets are yet to be set. No analyst was able to give SBB an assesment of this at such an early stage; steel and carbon trading companies had not responded to SBB’s queries by the press deadline.

Each individual plant, known as a Designated Consumer (DC), will have its energy use evaluated and set by an individual energy efficiency target, to be met by 31 March 2014. Plants that exceed their target will be granted Energy Savings Certificates (ESCerts). Those which fail to achieve their targets must either buy ESCerts or face a fine.

From 1 April 2014 the second phase will begin, SBB understands. At this point ESCerts will be traded on exchanges in the same way that carbon credits are traded under Europe’s Emissions Trading System. New targets will also be set, which must be met by 31 March 2017.

In addition to the iron and steel industry, the aluminium, cement, thermal power, pulp and paper, textile, fertiliser and chlor alkali industries will also be affected, SBB understands.